Sources close to the development said BSE was informed about the extension of tenure of public directors last week. The Sebi decision was due to the fact that though the Kania panel has submitted its report to the regulator, it will take some more time for the regulator and other players including stock exchanges to achieve the goal of converting the current entity into a corporatised and demutualised organisation.
The Sebi group on corporatisation and demutualisation, headed by former Chief Justice of India, MH Kania, was appointed by the regulator in March this year to look into the ways of corporatisation and demutualisation of stock exchanges and consolidation of the bourses. The group submitted its report only on August 28.
The Kania panel has suggested three stakeholders shareholders, brokers and investing public through the regulatory body should be equally represented on the governing board of the demutualised stock exchange.
There should be specific vacancies on the board for each group of stakeholders, the shareholders representative should not be a functioning broker, the brokers representatives would be elected by shareholders from among the brokers of the stock exchange, the representatives of the investing public would be nominated by Sebi from among a panel comprising academics, professionals, industry representatives, public figures and investor associations none of whom should have any interest in any broking firm.
The panel has further suggested that adequate disclosures about the background of the directors of the board should be provided to shareholders at annual general meetings and in annual reports. The maximum number of directors on the board will be governed by the relevant provisions of the Companies Act (1956).
Presently, there are seven public directors on the governing board of the BSE. They are: Justice DR Dhanuka, SS Thakur, Anna Malhotra, Prof Sameer Barua, IIM Ahmedabad, NP Sarda, Mr Jambunathan and Mr Habibullah.
Sebi and the Reserve Bank of India (RBI) withdrew their directors from the board last year itself after then finance minister Yashwant Sinha announced on the floor of Parliament that all the stock exchanges in the country will be corporatised and demutualised. Prior to this, Sebi had asked all the broker directors across all the exchanges to step down and the public directors were asked to continue on the board.